The corporatization of the Postal Service: Post office closures, suspensions, relocations, and reductions in 2013

January 7, 2014

One of the most persistent refrains in the debate about the Postal Service is that it needs to act more like a business. That means different things to different people, but for many, the model for where the Postal Service needs to go is to be found in Europe. In the EU countries, where the process of liberalization has been going on for fifteen years, the government monopolies have come to an end and the marketplace has been opened to more competition. According to free-market doctrine, the competiton was supposed to lead to lower prices and better services, but things haven't quite worked out that way.

According to a new report on the recent history of postal systems in Europe, “liberalization has not improved services and reduced prices as promised by the European Commission and others.” Instead, in countries where the postal systems have been deregulated and privatized, large corporations have come out the winners and average citizens and postal workers have come out the losers.

Consumers see their post offices close and get replaced by postal counters in private businesses. The mail is delivered only two or three days a week and primarily in highly populated areas. For postal workers, liberalization has led to lower wages and more part-time and self-employed contract jobs with little security and few benefits.

While consumers and workers get the short end, large mailers get their mail picked up more frequently, and in many cases their rates have gone down thanks to lower labor costs, cutbacks in postal services for the general public, and the special deals mailers can negotiate with the carriers. The private shareholders in the former public monopolies and the executives of postal businesses are also coming out ahead. Even with declining volumes in letter mail, there are big profits to be had in the mail industry.

The corporatization of the Postal Service

The citizens of the United States have never voted to privatize the Postal Service, but the process of corporatization has been going on for a long time. With each passing year, the Postal Service acts less and less like a public service and more and more "like a business." The scenario that has played out in Europe is playing out in the U.S., just in its own way.

Since 2000, the total number of USPS employees has been reduced by a third, and part-time workers now comprise over 20 percent of the workforce. The Postal Service outsources wherever it can — over $12 billion of its $65 billion in annual expenses go to private contractors and suppliers. Over half of the Postal Service's processing plants have been consolidated, while the workshare system has led to the creation of a huge private-sector consolidation industry, with companies like Pitney Bowes and Quad/Graphics reaping huge profits.

Consumers aren't seeing post offices closing by the thousands, but the hours are being reduced, sometimes to two or four hours a day. A huge network of "alternate retail access points" has been developed to replace brick-and-mortar post offices. Collection boxes are being removed from city streets, the speed and reliability of mail delivery are going down, more customers are getting cluster boxes, postal properties paid for by taxpayers are being sold off, and the lines at post offices are as long as ever, maybe longer.

The Postal Service and Congressional leaders typically blame the service cutbacks and downsizing on the big drop in mail volumes, but the transition toward a corporatized postal system predates declining volumes by a long time. As Christopher Shaw tells it in Preserving the People’s Post Office, there’s nothing new about efforts to close post offices, reduce window hours, get rid of collection boxes, shift to cluster boxes, and everything else we’ve been seeing.

The first big step toward corporatization was the 1970 Postal Reorganization Act, which turned the Department of the Post Office into the Postal Service. The process got a big boost in 2003, when President Bush appointed a Commission on the Postal Service. Its report, which seems to have served as a blueprint for Darrell Issa’s postal reform agenda, said that while the country wasn't ready for postal privatization the Postal Service should be run more like a private business. The Commission recommended expanding retail services to private stores, making it easier to close post offices, outsourcing more to the private sector, offering more workshare discounts, setting up a BRAC-like commission to consolidate processing plants, “rightsizing” the workforce, and disposing of postal real estate to “provide benefits to the public in the form of moderated rate increases.”

Many of these recommendations were implemented in the 2006 Postal Accountability and Enhancement Act. For example, PAEA directed the Postal Service to expand “alternate retail options” like vending machines, kiosks, the Internet, and “retail facilities in which overhead costs are shared with private businesses" (sec. 302). These alternatives were not intended simply to improve consumers’ access to postal services. They were about developing an infrastructure that would make it easier to close post offices.

Bush’s Commission came out with its report in 2003, when mail volumes were increasing. PAEA was enacted in 2006 — the year Shaw’s book was published — when mail volumes were at their peak. Declining mail volumes thus had little if anything to do with the rationale for cutting services and closing facilities.

The rationale then, as it is now, was about something else. As Shaw makes clear in his book, the goal has always been to commercialize, corporatize, and eventually privatize the Postal Service in order to enhance the profits and wealth of the corporate stakeholders of the mail industry.

Measuring “customer satisfaction”

Given the influence of these stakeholders in Congress, it’s no surprise that there is little in current postal laws — and much less in proposed legislation — to protect the interests of average consumers and postal workers. PAEA does make a nod, however, toward showing some concern about what is vaguely described as “customer satisfaction.” Section 3652 of the act requires the Postal Service, as part of its Annual Compliance Report (ACR) to the Postal Regulatory Commission, to report on the degree of customer satisfaction.

The main way the Postal Service fulfills this requirement is by conducting a Customer Experience Measurement (CEM) survey. About 300,000 residential customers and 310,000 businesses rate the Postal Service’s performance with respect to each type of mail. In most cases, around 85 percent of the respondents say they are very or mostly satisfied.

The survey may be helpful, but a survey can only tell part of the story. The PRC has therefore developed regulations that require the Postal Service to provide more information in order to help the Commission gauge customer satisfaction when it reviews the ACR for its Annual Compliance Determination Review (ACDR).

According to these regulations (39 CFR 3055.91), the Postal Service must provide the following information: The number of post offices, emergency suspensions, delivery points, and collection boxes that existed at the beginning of the fiscal year and at the end of the year, along with the total number of closings, suspensions, new delivery points, and collection boxes removed and added. The ACR must also provide data on average customer wait time.

The main purpose of the compliance review is to determine whether or not the Postal Service is in compliance with service standards and the requirement that each type of mail cover attributable costs. Matters involving consumer satisfaction represent a relatively small part of the review.

The Postal Service has been resistant to providing even a minimal amount of data about the subject, however. When the PRC was first developing the section 3652 regulations in 2009, the Postal Service objected to the new reporting requirements. Valpak, which thinks that providing services for average customers drive up its rates, supported the Postal Service in its objections. In the end, however, the PRC argued that given the vagueness of the “customer satisfaction” requirement in section 3652, it was necessary to review more than the CEM survey results. (See PRC Order 465.)

The compliance review does not do very much to ensure the quality of postal services for the general public, but it does provide some degree of transparency about topics like consumer access to postal services. It may also provide some incentive for the Postal Service to keep up its ratings on customer satisfaction.

The information that comes out as a result of the compliance review actually does something more, however. In looking at the data on post office closings and suspensions and the growth of alternative retail access and so on, one can chart the progress of postal liberalization and see in quantitative terms how the Postal Service is slowly being transformed from a public service into a postal corporation.

The ACR numbers

The Postal Service submitted the ACR on December 27, and over the next few weeks, the Commission will review the report and then issue the ACDR sometime in March. The Commission has asked the Postal Service to fulfill its obligation under PAEA by providing the following data (in essentially this form, as described in PRC Order No. 465). The complete data tables are in Library Reference USPS FY13-22-2; we've put them on Google Docs here.

USPS ACR FY 2013

Number at beginning of FY 2013

Number at end of FY 2013

Number during year

Post Office Closures

Closed

Post Offices

26,708

26,648

60

Stations and Branches

4,962

4,949

13

Carrier annexes

689

689

0

Total closings

32,359

32,286

73

Emergency Suspensions

Suspended

Post Offices

254

99

126

Stations and Branches

56

31

35

Total suspensions

310

130

161

Delivery Points

Change

Curb

52,987,245

53,472,871

485,626

CBU

17,270,574

17,690,277

419,703

Centralized

20,888,776

21,304,696

415,920

Other

35,017,042

34,936,855

-80,187

Total Delivery Points

126,163,637

127,404,699

1,241,062

Collection Boxes

Change

Total Boxes

164,099

159,729

-4,370

Wait Time in Line

Average (minutes)

2:29

2:34

-0.05

That is about all the regulations require the Postal Service to provide in its ACR, but the Commission will ask for more in order to prepare the ACDR. PRC Chairman Ruth Goldway has already issued her first information request. It asks for lists of post offices that closed and were suspended, as well as more information about CPUs, revenue data on POStPlan post offices, etc. It’s anyone’s guess why the Postal Service doesn’t just provide the additional information to begin with, since it knows what it was asked for last time around, but the Postal Service doesn’t like to provide any more than required.

Since the PRC’s ACDR won’t be out for a couple of months, here's an overview of what happened during FY 2013 with respect to consumer access to postal services. The Annual Compliance Report is here, the PRC Docket is No. ACR2013, and last year’s article on Save the Post Office about the ACR data and customer access is here.

Post office closures

One of the most direct assaults on people’s access to the postal system — and one of the main goals of postal liberalization — is closing post offices, but it’s also one of the most controversial. People value their post offices. But corporate mailers don’t use post offices, and they typically advocate closures as a way to cut costs, avoid rate increases, and shift postal retail profits to the private sector. That’s what has happened under postal liberalization in Europe. In the U.K., they have closed almost half of their 23,000 post offices. Germany closed virtually all of its government-run post offices and replaced them with privately owned retail outlets. Sweden has very few government post offices anymore.

The Postal Service has been talking about closing thousands of post offices since the late 1970s, and the idea of replacing them with postal counters in convenience stores (which we now see in the Village Post Office initiative) goes back decades. But progress toward closing them has been relatively slow. Over the past 40 years, the number of government-run post offices in the U.S. has dropped from about 36,000 to 32,000 — about a hundred closures per year.

The past year was somewhat below average for closures. The ACR reports that the Postal Service closed 73 retail offices in FY 2013 — 60 post offices and 13 stations and branches. That’s in contrast to the previous two years, which saw the beginning of a big push toward mass closures. According to the PRC’s 2012 ACDR, the Postal Service closed 289 post offices, stations, and branches in FY 2012 and 382 in FY 2011.

The PRC has asked the Postal Service for a list of the closures in FY 2013, and it should be available soon. In the meantime, there are several sources for information about post office closings.

Postal Bulletin regularly publishes discontinuances. A list of discontinuances implemented during FY 2013 based on these announcements is here. It shows 68 discontinuances: 58 post offices and 10 stations and branches. It looks like all but ten of these closures were based on discontinuance studies done before the fiscal year began.

Postmasters Advocate, the publication of the League of Postmasters, published a list of its own a few weeks ago showing 70 closings during FY 2013. That list is here. A table based on the Advocate list, with additional information from the USPS facilities lists, is here.

One can also search for post office discontinuances on USPS Postmaster Finder. It shows 57 post office closures and does not include stations and branches. A table based on Postmaster Finder is here.

These lists are largely the same, but there are several inconsistencies — closures on one list don't show up on the others. It also appears that many of these closings did not actually occur during FY 2013. Keene Valley, New York, for example, shows up on the lists, but it closed for an emergency suspension in 2010 over a lease issue, and it was replaced in 2011 by a Village Post Office. Perhaps the PRC can get all this straightened out with the Postal Service so that there's a correct list of which post offices actually closed in FY 2013 after a discontinuance review.

It also appears that nearly all of the closures in FY 2013 were based on discontinuance studies that were done in 2011, before the five-month moratorium on closures when into effect in December of 2011. If that’s correct, it should be a matter of some concern. Much of the data on which those final determinations were based is probably out of date, and circumstances may have changed. If the Postal Service is going to continue to close post offices based on 2011 studies, that problem will become even more pronounced.

There may also be a question about how many post offices actually closed. In the USPS 10-K for 2012, the Postal Service reports that there were 31,150 post offices, stations, and branches in 2013, as opposed to 31,272 in 2012 — a net decrease of 122. In the Reply Comments it filed in the exigent rate case a few weeks ago, the Postal Service said that during FY 2013 the number of retail facilities had been reduced by 155. These numbers are both much larger than the 73 reported in the ACR. The source of these discrepancies is unclear.

Appeals on closures

The ACR doesn’t discuss post office appeals, but here’s a recap for FY 2013. Since there were so few new final determinations to close post offices issued during the year, there were very few post office appeals brought before the PRC. Only ten appeals were filed between October 1, 2012 and October 1, 2013. That’s in contrast to 127 for the previous fiscal year.

Here's what happened with these ten appeals. Two were not even considered because the appeal was filed late (in one case, by just one day late, in another, by just a few days). Five appeals were dismissed — three because the closure was part of a relocation (even though no new location had been identified); one because it was premature (the post office was under emergency suspension, not discontinued); and one because the Postal Service withdrew the final determination. Of the appeals that were actually reviewed by the Commission, two final determinations were affirmed, and one was remanded. Here's a list of the ten appeals with links to the final orders.

It does not appear that FY 2014 will be much different. So far, three months into the fiscal year, only one appeal has been filed (on Stamford, Connecticut), and there seem to be only a handful of discontinuance studies underway. One notable case is Redlands, California, where a historic post office is under review for closure. If this post office is discontinued, the decision will almost certainly be appealed to the PRC.

For now, then, the Postal Service seems to have backed off of big initiatives to dismantle its legacy of brick-and-mortar post offices. That may change, however, if new legislation makes it easier to close post offices. Darrell Issa’s Postal Reform Act (H.R. 2748) would help. It would remove the prohibition on closing post offices solely for operating at a deficit; shorten the appeals process from 120 days to 60; deny a community the right to appeal a closure if a contract postal unit is opened within two miles of the closed post office; and strike “a maximum degree of” from the requirement that “the Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining.”

Emergency suspensions

The Postal Service has a long history of bending the rules on emergency suspensions in order to close post offices without going through a long discontinuance review. In 1997, Congress became sufficiently concerned that it asked the GAO to do a report, and in 2010, the PRC initiated an investigation into the problems (the docket, PI2010-1, is still open).

The ACR reports there were 254 post offices and 56 stations and branches under suspension when FY 2013 began, and there were 99 post offices and 31 stations and branches under suspension when the year ended. During the year, 126 post offices and 36 stations and branches were placed under emergency suspension.

Some of these suspensions are long-standing and represent unresolved issues, while others lasted a relatively short period of time and the post office soon reopened (like after a weather-related emergency). The PRC has previously expressed concern about how long some post offices remain under suspension without being reopened or formally discontinued, and it may need to reiterate that concern this year.

The ACR materials do not include a list of those offices under suspension, but the Chairman’s first information request has asked for one. It will be interesting to see the reason for each suspension.

As in previous years, many offices have closed during FY 2013 because of problems that arose when it was time to renew the lease, and in many instances, the problems seemed manufactured by the Postal Service. In other cases, health and safety issues were cited, even though the problem seemed minor — like a little mold in the building — or long-standing and not an “emergency” at all. In some cases, the problem was an inability to staff the office, but that too seems as though it was a problem of the Postal Service’s own making. When it reduces hours at a post office to two or four a day and is paying $12 an hour, whose fault is it when no one wants the job?

With over 160 post offices being suspended during the year, it’s likely that in many cases the reason cited by the Postal Service is suspect. There have been numerous news reports about suspensions in which elected officials and citizens in the community expressed skepticism about the legitimacy of the Postal Service’s claims. People believe that the Postal Service simply wanted to close the post office and basically cooked up the “emergency.”

A list of suspensions in FY 2013 based on these news items is here. It contains about two dozen cases — fifteen involving lease issues; four due to unsafe building conditions (three due to mold); and five caused by an inability to find adequate personnel to run the office. Most of these suspensions are discussed in posts on Save the Post Office, which are archived here.

POStPlan reductions

The Postal Service has been reducing window and counter hours at post offices for decades. In 2003, for example, the Postal Service began reducing hours in many locations, such as three quarters of the post offices in Maine. (For more on this history, see Shaw, pp. 98-100.)

The current plan to reduce hours, POStPlan, is by far the most extensive effort in this regard. By the end of 2014, hours will be reduced at 13,000 post offices. The process is well underway.

The ACR says that since 2012, the Postal Service has reduced hours at 7,985 post offices under POStPlan. Of these, 1,090 post offices have been converted to two hours per day; 4,203 have been converted to four hours per day; and 2,692 have been converted to six hours daily. A list of 8,591 offices where POStPlan has been implemented is here.

The ACR says that more than 8,400 meetings have been held with community members. A list of 8,512 meetings held between October 9, 2012, and November 15, 2013, is here.

The ACR says that the purpose of these meetings was to discuss the new hours of operations “as well as alternatives.” But the community's preferences on the hours are typically trumped by the Postal Service's "operational needs," and the only "alternatives" to reducing the hours — like “transitioning” services to a nearby post office or using rural carriers — also involve closing the post office. These aren’t real alternatives, and no community chooses one of them. In fact, the PRC ought to ask the Postal Service for a breakdown of what “options” each of these 8,400 communities have chosen. Has a single one elected to have the post office close? Was it really necessary to hold 13,000 meetings and send out surveys to customers at each one of these post offices? What was accomplished?

The PRC’s first information request has asked about closures at POStPlan offices. That could be an issue, since the whole purpose of POStPlan was to keep post offices open, not close them. It appears that a couple of dozen POStPlan post offices closed during the fiscal year for one reason or another. A list is here.

In the ACR, the Postal Service says that so far POStPlan has saved $171 million in annual costs. That’s about a third of what the annual estimated savings will be when POStPlan is fully implemented. (There’s a detailed discussion of the cost-savings here.)

The Postal Service’s estimates on cost savings don’t include lost revenue, and that too could be a question for the Commission to consider. The Postal Service has assumed from the beginning that there wouldn’t be any significant loss in revenue. If revenue numbers were to go down at a POStPlan post office, it was assumed that the revenues had migrated somewhere else within the postal system. That’s almost impossible to prove one way or another, but the PRC has nonetheless asked the Postal Service to provide revenue data for all the POStPlan offices. If a significant amount of revenue has been lost at these offices, it could raise questions about the overall impact of the plan.

The numbers on POStPlan also don’t capture a lot of what’s happening at these post offices. In a recent news report about POStPlan implementation in Montana, for example, the part-time PMR responsible for running one office said that she finds it impossible to get all the work done without working overtime, but whenever she puts in for extra hours, she’s questioned about it, so she feels like she’s working full-time for half-time pay. “I’ll never work for the post office again,” she vowed. Another PMR in Montana said the reduced hours since February have no doubt cost the post office business, but he doesn’t know if customers are going to another post office or not.

Overall, POStPlan has drastically diminished access to postal services for millions of Americans, and over the coming years, things will only get worse. Another five thousand offices will have their hours reduced in FY 2014, and every POStPlan office will be reviewed annually to see if revenues have fallen to the point that the hours need to be reduced even further. This year the Postal Service is also going to begin reviewing Level 18 offices for hour reductions as part of the next phase of POStPlan, which would be implemented in 2016.

Post office relocations

One of the biggest sources of customer dissatisfaction during FY 2013 involved post office relocations. As with reducing the hours, this practice has a long history. The general pattern is for the Postal Service to close a large, historic post office in the center of town and to replace it with a small retail facility outside of downtown, often in a carrier annex. Since the post office is being “relocated,” not closed, the Postal Service says it does not need to go through a formal discontinuance process, which keeps the public’s opportunity for input at a minimum.

For many years, the Postal Service barely even considered the community’s views at all when making relocation decisions. That changed somewhat in 1998, when the Postal Service added a section to the federal regulations (39 CFR 241.4) guaranteeing at least some opportunity for community participation in relocation decisions. That change may have been the result of what happened in places like Livingston, Montana, where the Postal Service decided to close the landmark downtown post office and replace it with a new one on the outskirts of town. The town protested, the case drew national attention, and the historic post office remained where it was — and where it remains today. (For more on the history of relocations, see Shaw, pp. 54ff.)

The ACR does not discuss relocations, but during FY 2013 they were a much bigger source of controversy that post office closures and suspensions. Issues about how the Postal Service has been conducting the relocation procedures have led to an audit investigation by the USPS OIG, now underway, and several of the post office appeal cases brought before the PRC involved these relocations.

It would be helpful if the PRC included the issue in its compliance review. Perhaps the Postal Service could prepare a list of relocations similar to those the PRC has requested concerning closures and suspensions, with information about when the relocation notice was posted at the post office, the date of the community meeting, the final decision date, the disposition of any appeals, the new location if it has been identified, and the current status of the relocation.

A list of relocations over the past three years based on the news is here. It doesn’t have the dates when the decision was made or implemented, so some of them were before or after FY 2013. A discussion of the relocation issues can be found in this recent post.

Disposal of properties

The most blatant form of privatization is the transfer of public property into private hands, and the sale of post offices and other postal properties has therefore been another matter of controversy over the past year. As with relocations, this is not a subject covered in the ACR, but for many communities, when it comes to “consumer access to postal services” and “customer satisfaction,” nothing matters more than having your historic post office sold out from under you.

Over two thousand towns and cities have a historic post office that is a landmark presence in the community. Many contain priceless art commissioned during the New Deal. The Postal Service has clearly embarked on a plan to sell many of these post offices, as well as properties of more recent vintage, but it refuses to provide a list of those that have been reviewed and those that have been earmarked for disposal, so the full scale of the plan remains unknown. The National Trust and the Advisory Council on Historic Preservation have expressed their concerns, but the sales go on.

The USPS Annual Report to Congress says that there were 44 property disposals in FY 2013 and 49 in FY 2012. That obviously does not include facilities currently on the market or being considered for sale. The Postal Service has not released a list of those sold or for sale, but as with relocations, there’s information out there in news articles and in information gathered by Peter Byrne for his investigation into the sale of postal properties by CBRE.

As with relocations, the PRC should consider including the sale of post offices part of its ACDR. Since that probably won’t be happening, a list of recently sold properties is here, and a list of historic post offices sold, for sale, or under review for sale, is here. For more, see this post and check out Byrne’s book.

Premier and Competitive Post Offices

While hours are being cut at rural post offices and historic post offices are being sold off and replaced by small leased facilities, the Postal Service has been focused on increasing revenues at a few select post offices. Over the past two years, two new classifications of post offices have been created — Premier and Competitive. The ACR doesn’t have anything to say about these new classes of post office, but perhaps the PRC should ask for more information about them.

In 2011, the Postal Service designated about 3,100 of its most profitable post offices as Premier. While they represent only about 10 percent of the retail network, these post offices account for 44 percent of all walk-in and self-service kiosk revenue. The purpose of the program is to improve the customer experience and maximize revenues at these offices by giving the staff special training and by offering special products. When the Harry Potter stamps were released, for example, they were initially available only at Premier post offices. During the busy holiday mailing season, hours were extended at many Premier offices. The Premier program thus raises questions about why customers at other post offices should get second-class treatment and why products and services aren't uniformly available. A list of the Premier Post Offices is here.

In 2012 the Postal Service designated 6,800 post offices as Competitive post offices. At these offices, the Postal Service charges more for post office boxes than it does at its regular post offices, while providing additional services like those offered by competitors, such as email notification of mail delivery, receiving packages from private carriers, and delivery on Saturday. The Competitive post office idea has met with opposition by FedEx and private mailing centers because of the competition they represent. Like Premier post offices, the Competitive post offices also raise the question of why some post offices would offer services not widely available. A list of the Competitive Post Offices is here.

About 1,280 of the Competitive offices are also classified as Premier, so at these post offices, customers are getting special treatment — and paying extra for it. A list of these offices is here.

Coming next: The year in review, part 2: Alternate access, collection boxes, delivery points, and wait time